Nigeria’s interbank lending rates displayed a mixed pattern on Tuesday, following the injection of fresh liquidity from matured Open Market Operation (OMO) bills. The influx of funds eased pressure in the financial system, even as the Central Bank of Nigeria (CBN) intensified liquidity management efforts.
Cash conditions in the banking sector have been volatile due to periodic liquidity tightening measures. However, the recent maturity of OMO instruments worth N264 billion has improved overall market liquidity. Prior to the public holiday, the system’s net liquidity position had declined to N1.03 trillion from the N1.90 trillion recorded a week earlier, largely due to hefty absorption through treasury and OMO auctions.
Last week, the CBN mopped up excess liquidity with a N450 billion Nigerian Treasury Bills (NTB) auction and another N1.51 trillion through OMO sales. Tuesday’s inflow from maturing instruments helped cushion the market’s funding profile, keeping short-term interest rates relatively stable.
Despite a cash reserve ratio (CRR) debit on banks that failed to meet the lending-to-deposit benchmark, money market rates remained broadly steady around 26.5%. This reflects a moderated borrowing demand due to ample system liquidity.
Nigerian Interbank Offered Rate (NIBOR) trends showed general declines across most tenors, excluding the overnight rate which held steady at 28.83%. The 1-month rate dropped by 63 basis points (bps), the 3-month rate fell 126 bps, and the 6-month NIBOR declined by 193 bps, according to data from Cowry Asset Management.
In tandem, the Open Buy Back (OPR) rate maintained a level of 26.50%, while the Overnight Lending Rate (OVN) inched up by just 1 basis point to 26.95%, reflecting minimal shifts in overnight liquidity dynamics.
Analysts expect interbank rates to remain largely stable in the near term, barring any aggressive monetary interventions by the central bank. The CBN is expected to continue fine-tuning liquidity through OMO issuances and other open market tools to align short-term rates with prevailing policy benchmarks.
